OUR Chancellor of the Exchequer Rishi Sunak is worth £730 million, which is more than U2 (£625m), and also Elton John (£395m) and Sting (£320m) put together, according to this year’s Sunday Times Rich List.
So the next time Rishi says he understands what ordinary people are going through in the current financial crisis . . . you’ll know exactly where he’s coming from.
Rishi made his money running a hedge fund. This is not a fund that invests in bushes, shrubs and trees. It’s an offshore investment vehicle that invests the money of high net worth ( = stinking rich) individuals and institutional investors. If you, the fund manager, get it right, your rewards are huge.
Down here on the street, however, we are no Rishi Sunaks. We have to wonder how our family would survive if they were to lose our income if we had to give up work, or even died.
This is where a particular set of insurances come in. The insurances that protect our family are known, appropriately enough, as ‘family protection’ insurances.
The first, and best understood, is life insurance. Many who do not have a life policy take it out, at the latest, when their first child arrives, because suddenly you have this little person whose welfare depends on you.
They say we don’t buy life insurance because we are going to die; we buy it because our family are going to live. By being insured, we can rest easy that our children’s path to college, or to buying their first home, will not be blocked by losing us.
We may not be around to see them get there, but we can leave them some financial security on their onward journey.
The other family protection insurance is critical illness insurance, or ‘CI’ for short. If life cover is what you have for when you die, CI is what you have for when you don’t. You have it for when some adverse circumstance hits you, which you survive.
If you suffer a major health event such as cancer, a heart attack, or a stroke, for instance, you could be off work for years – if you’re ever able to work again at all.
This could be disastrous for your family. The Association of British Insurers (ABI) says that most (60 per cent) working families would lose a third of their household income if the main earner had to stop work, and 40 per cent would actually lose half.
It will come as no surprise that the biggest critical illness is cancer, and by a long way. MacMillan Cancer Support tell us that more than half of us will suffer some form of cancer, during our lives.
Critical illness is not just an older person’s problem, either. The average age for claims is just 47.
Oh, and before we wind up, I should mention another great way to leave money for your children, although it’s not an insurance. Did you know you can provide a pension for your children by opening a Child Stakeholder Pension in their name, no matter how young they are? You pay in monthly, and get the standard tax relief on those payments, and because the money has so long to grow, you may be leaving your children with substantial pensions for their retirement.
It’s just an extra string to their bow alongside any pensions they may build up themselves, and you’re giving them the gift of peace of mind right throughout their working lives.
So if you aren’t as rich as Rishi, if you’re a bit skint and down on your luck like U2, Elton and Sting, then family protection insurances could be the way to go. They ensure that your loved ones are sheltered from all the financial shocks that life (or death) can bring.
Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005 . Further information on Facebook at Kennedy Independent Financial Advice or at mkennedyfinancial.com
